Council Puts End To Double-dipping

Retirement Law Loophole Closed

November 20, 1990|By MICHAEL S.C. CLAFFEY Staff Writer

NEWPORT NEWS — The City Council has closed a loophole in the city's retirement law that has allowed as many as 20 retirees from the fire, police and sheriff's departments to collect both retirement and worker's compensation payments at the same time.

While reviewing the budgetary impact of an early retirement program put into effect last year, city officials discovered that some disabled retirees were "double-dipping" and in some cases receiving 110 percent or more of their salary, said H. Daniel Snead, administrator of the city self-insurance program.

Under a change in the city retirement law adopted last week, employees who have retired and are then awarded worker's compensation for work-related injuries will no longer be able to collect both retirement pay and worker's compensation payments.

"It would be unfair because of a loophole to get a raise for retiring," said City Manager Edgar E. Maroney.

Maroney said that, in effect, employees who qualify for worker's compensation would be receiving close to 100 percent of salary for the 500 weeks that the payments last, because the payments, which amount to two-thirds of salary, are tax-free.

The legality of the city's action was promptly questioned by Stephen M. Smith, an attorney who has handled thousands of worker's compensation cases, who said it would invite "unnecessary litigation."

Smith said he believes the city's action is in conflict with state and federal laws.

"The city cannot arbitrarily legislate away rights that have been granted at the state and federal level," Smith said. "That's a person's right. If they've put in the time and earned the benefit, the city cannot arbitrarily take it away."

Ron Jones, benefits administrator of the city's retirement fund, said the loophole had existed since at least 1958, when the retirement plan was created.

City officials noticed it was being taken advantage of when four of five applications for worker's compensation were made by retirees who opted for the early retirement program offered last year, Jones said.

"Normally, you wouldn't think someone would go out on service retirement and then come back and ask for worker's compensation," Jones said.

Under the loophole, Jones said, an employee who had qualified for service retirement payments matching 55 percent of salary by working for 30 years could then apply for worker's compensation payments, which amount to two-thirds of salary and are tax-free and last for 500 weeks.

Under the change, a retiree would only be able to receive one or the other payment.

Jones said the change should yield some savings for the city-funded retirement plan, because in most cases worker's compensation would provide greater payments. Once those payments run out, the retiree would start receiving retirement pay.

"This closes a small loophole in the retirement law," said Snead, who is in charge of worker's compensation for the city. He could not say how much the loophole has cost the city, but he said he believes the amount was small. "It's a small thing, but it could prevent larger problems in the future."

The change will not affect retirees who are already receiving the excess payments, because once benefits have been awarded they cannot be taken back, said Jones.

Uniformed personnel in the police, fire and sheriff's departments are eligible for the workmen's compensation if they retire due to a service-related injury, such as back or knee injuries or heart or lung problems. Under state law, Snead said, there is a presumption that heart conditions contracted by uniformed employees are work-related, as a result of job stress.